New Report Underscores Ineffectiveness of Unilateral Sanctions with Extraterritorial Reach

Date: 8/3/2007

Details Countermeasures Enacted by Countries
to Prohibit Compliance

Washington
DC – Some of the United States’ closest trading partners are responding
to U.S. extraterritorial sanctions by enacting countermeasures and other means
to block their application in foreign jurisdictions, according to a new report
by the law firm of Dewey Ballantine LLP.The paper, Foreign Sanctions Countermeasures and Other Responses to
U.S. Extraterritorial Sanctions, was
commissioned by USA*Engage and the National Foreign Trade Council (NFTC) and
reports that despite the United States maintaining old and enacting new
unilateral sanctions with extraterritorial reach, many of our allies have
opposed them with countermeasures, thwarting their intended effects.

“The reality is that sanctions are only effective if
they’re widely applied. Unilateral sanctions by far represent the most
ineffective means to impact a foreign government or persons whose policies and
behavior we disagree with or want to change,” said NFTC President Bill Reinsch.
“The same is true for unilateral sanctions that extend beyond our borders and
attempt to affect the behavior of entities, companies or persons overseas. These
measures put companies in the impossible position of violating someone’s law no
matter what they do.”

The report, written by Harry Clark and Lisa Wang of Dewey
Ballantine, chronicles the history of nations using blocking statutes,
trade complaints, U.N. declarations and other
countermeasures to criticize, block or sidestep U.S. sanctions. As the paper
points out, “During the Cold War, U.S. allies obstructed U.S. extraterritorial
sanctions on the supply of materials for Soviet Union gas pipelines in Europe.
Since the end of the Cold War, U.S. trading partners have supplemented blocking
measures by challenging U.S. sanctions as being contrary to World Trade
Organization (WTO) trade agreements.”

The paper notes,
however, that while this trend has a long history, U.S. trading partners are now
employing new, more creative means to avoid application of U.S. extraterritorial
sanctions. Countries are not only using countermeasures consciously to block
U.S. sanctions, but are also enacting civil rights laws and other legal defenses
to justify not applying sanctions.

The report concludes by noting that, extraterritorial sanctions
“could impede U.S. leadership and international collaboration needed to advance
U.S. national security and foreign policy interests, including coordination to
suppress international terrorism…[C]onflicts with authorities in other major
economies, like the EU, are placing U.S. companies at risk of legal double
jeopardy.It would be useful to
consider whether these types of disadvantages are outweighed by any utility from
applying foreign policy sanctions extraterritorially.”

The release of the paper comes on the heels of votes
Tuesday in the House of Representatives on Iran and Sudan sanctions legislation,
which would target foreign companies doing business in those
countries.

“Just this week we saw the House approve a measure that
would expand the scope of sanctions against Iran to reach foreign subsidiaries
of U.S. companies in Europe and Asia,” said USA*Engage Director Jake Colvin.
“If, at the end of the day, those governments block the sanctions, or lodge
complaints with us or the WTO, you start to become concerned that the good
intentions of Congress might lead to an unproductive outcome.”

USA*Engage (www.usaengage.org)
is a coalition of small and large businesses, agriculture groups and trade
associations working to seek alternatives to the proliferation of unilateral
U.S. foreign policy sanctions and to promote the benefits of U.S. engagement
abroad. Established in 1997 and organized under the National Foreign Trade
Council (www.nftc.org), USA*Engage leads a campaign to inform policy-makers,
opinion-leaders, and the public about the counterproductive nature of unilateral
sanctions, the importance of exports and overseas investment for American
competitiveness and jobs, and the role of American companies in promoting human
rights and democracy world wide.

The National Foreign Trade
Council (www.nftc.org) is a leading business organization advocating an open,
rules-based global trading system. Founded in 1914 by a broad-based group of
American companies, the NFTC now serves hundreds of member companies through its
offices in Washington and New York.